Why Republicans want to tax students and not polluters

Robert B. Reich

A basic economic principle is that government ought to tax what we want to discourage, and not tax what we want to encourage.

For example, if we want less carbon dioxide in the atmosphere, we should tax carbon polluters. On the other hand, if we want more students from lower-income families to be able to afford college, we should not put a tax on student loans.

Earlier this year, the Republican-led House passed a bill pegging student-loan interest rates to the yield on the 10-year Treasury note, plus 2.5 percentage points. "I have very little tolerance for people who tell me that they graduate with $200,000 of debt or even $80,000 of debt, because there's no reason for that," said Rep. Virginia Foxx, Republican of North Carolina and the co-sponsor of the GOP bill.

Republicans estimate this would bring in around $3.7 billion of extra revenue over a 10-year period, which would help pay down the federal debt.

In other words, it's a tax -- and one that hits lower-income students and their families hardest. Which is why several leading Democrats, including Senate Majority Whip Richard Durbin, Democrat of Illinois, oppose it. "Let's make sure we don't charge so much in interest that the students are actually paying a tax to reduce the deficit," Mr. Durbin argues.

Republicans claim the president's plan is almost the same as their own. Not true. President Barack Obama's plan would lead to lower rates, limit repayments to 10 percent of a borrower's discretionary income, and fix the rate for the life of the loan.

Meanwhile, a growing number of Republicans have signed a pledge -- sponsored by the multibillionaire Koch brothers' political organization, Americans for Prosperity -- to oppose any climate-change legislation that might raise government revenues by taxing polluters.

It is officially known as the "No Climate Tax Pledge," and its signers promise to "oppose any legislation relating to climate change that includes a net increase in government revenue."

At least 411 current officeholders nationwide have signed on, including the entire GOP House leadership, a third of the members of the House as a whole, and a quarter of U.S. senators.

The New Yorker's Jane Mayer reports that two successive efforts to control greenhouse-gas emissions by implementing cap-and-trade energy bills have died in the Senate, the latter specifically targeted by Americans for Prosperity.

Why are Republicans willing to impose a tax on students and not on polluters? Don't look for high principle.

Big private banks stand to make a bundle on student loans if rates on government loans are raised. They have thrown their money at both parties but have been particularly generous to the GOP. A 2012 report by the nonpartisan Public Campaign shows that since 2000, the student loan industry has spent more than $50 million on lobbying.

Meanwhile, the Koch brothers -- whose Koch Industries ranks among America's worst air polluters, according to Forbes Magazine -- have long been intent on blocking a carbon tax or a cap-and-trade system, which would cut into their profits. And they, too, have been donating generously to Republicans to do their bidding.

We should be taxing polluters and not taxing students. The GOP has it backwards because its patrons want it that way.

Robert Reich, former U.S. Secretary of Labor, is professor of public policy at the University of California at Berkeley and the author of "Beyond Outrage," now available in paperback. He blogs at www.robertreich.org.